By: James Gattuso, Heritage Foundation

May 18, 2010

Last month, a federal appeals court put a halt to the Federal Communications Commission's attempt to exert its authority over the Internet and its power play to regulate the companies who provide access to it. According to the Heritage Foundation, "The decision, issued by the U.S. Court of Appeals for the District of Columbia, centers around the FCC's efforts to enact 'net neutrality,' a policy that would prevent ISPs such as AT&T, Verizon and Comcast from managing the flow of traffic on the Internet by discriminating among content and applications that put a high load on their networks."

So what is "net neutrality" and why does the FCC want to impose it? And why do Internet providers worry that it will harm their businesses and ability to provide Internet service?

The following article was first printed on the Heritage Foundation's blog, The Foundry, on Sept. 21, 2009.

All credits and rights reserved.

It is followed by the text of a recent resolution from the Michigan House expressing that chamber's opposition to net neutrality. Both House Resolution 285 and House Concurrent Resolution 57 were recently approved by the Michigan House. Each is co-sponsored by a large majority of the membership in the House.

Declaring access to the Internet to be like "running water or the light bulb," FCC chairman Julius Genachowski declared [in April 2009] that it should be regulated. Specifically, he announced that the Commission will be voting next month [Oct. 2009] on a proposal to impose so-called "net neutrality" regulation on Internet service providers such as AT&T, Verizon and Comcast.

Specifically, the plan is to codify four Bush-era "principles" for Internet firms, while adding two more. The first four principles state that consumers are "entitled" to run applications, connect to devices, and access content of their choice, as well as enjoy a choice of providers (all subject to reasonable network management practices). Genachowski would add to these a ban on discriminating among any content or applications, and a mandate that service providers publicly reveal their network management practices.

While perhaps innocuous-sounding, these rules could play havoc with effort to manage congestion on the Internet. Last year, for example, Comcast's efforts to deter "bandwidth hogs" on peer-to-peer networks from slowing their download rates was declared illegal by the FCC.

There has been some question, however, as to the legality of the Comcast decision, since the four existing principles had never formally codified. The steps announced today would make them clearly enforceable. And the two additional principles would tighten the leash on network managers even more - making it even more difficult to manage constantly growing network traffic.

The net result - a slower and more congested Internet, and more frustration for users. Even worse, investment in expanding the Internet will be chilled, as FCC control of network management makes investment less inviting. The amounts at stake aren't trivial, with tens of billions invested each year in Internet expansion.

But the story doesn't end there. Genachowski would also make clear that these rules would apply not just to landline Internet connections, but to wireless carriers as well. So much for justifications of net neutrality rules based on a shortage of marketplace competition. Few industries are as competitive as wireless - with no fewer than 10 carriers with four million or more subscribers. Still, regulation, not consumer choice, will dictate how the networks are run.

The proposal seems sure to garner support from a majority of the FCC's three members. But it is equally sure to be appealed in court, where the FCC's abysmal record in defending its decisions (it is overturned more than any other regulatory agency) provides some hope. And not without reason - there's a real question as to whether the agency has the right to regulate the Internet at all. The Commission has explicit legal authority to regulate only "telecommunications" services. And, a few years ago, the agency ruled that broadband services were not telecommunications services.

Only two things are clear: the issue of neutrality regulation is far from settled, and lawyers' services will be at a premium as the debate proceeds.

James Gattuso handles regulatory and telecommunications issues for The Heritage Foundation as a Senior Research Fellow in its Roe Institute for Economic Policy Studies.

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Michigan House Concurrent Resolution 57

Adopted May 14, 2010

A concurrent resolution to memorialize the President, the Congress, and the Federal Communications Commission of the United States to refrain from regulating Internet broadband services as common carrier services under Title II of the Communications Act of 1934.

Whereas, Due in large part to the unregulated efforts of private enterprise over the past 25 years, the development of the Internet has dramatically transformed the way Michigan citizens work, live and learn. The deployment of efficient, fast, and reliable broadband networks through-out Michigan has created thousands of jobs and economic benefits for local economies; and

Whereas, In order to encourage the growth and development of the Internet, the Federal Communications Commission (FCC) has historically followed a policy to refrain from regulating broadband Internet services as common carrier services under Title II of the Communications Act of 1934. As a result, the United States has been at the forefront of technological, business, and social innovation on the Internet; and

Whereas, On May 6, 2010, the Chairman of the FCC announced a policy to reclassify broadband Internet services as common carrier services so that they can be more tightly regulated, with a proposal to forbear from imposing certain common carrier obligations on broadband Internet providers; and

Whereas, It is the judgment of the Michigan House of Representatives that using monopoly-era provisions of Title II of the Communications Act of 1934 to regulate the Internet will slow investment in Michigan's Internet broadband infrastructure and jeopardize future job growth; now, therefore, be it

Resolved by the House of Representatives (the Senate concurring), That we memorialize the President, the Congress, and the Federal Communications Commission of the United States to refrain from regulating Internet broadband services as common carrier services under Title II of the Communications Act of 1934; and be it further

Resolved, That copies of this resolution be transmitted to the President of the United States, the President of the United States Senate, the Speaker of the United States House of Representatives, the members of the Michigan congressional delegation, and the Commissioners of the Federal Communications Commission.

The question being on the adoption of the concurrent resolution,

The concurrent resolution was adopted.

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Editor's note: HCR 57 is now in the Michigan Senate. Contact information for senators is available at www.MichCapCon.com/9313.